Financial education was included into England’s secondary school curriculum from 2014. While this was a step forward in improving financial education for children and school-leavers, the problem was far from solved.
The Money Charity carried out research in 2016, identifying that 90% of schools were delivering financial education. While uptake figures are pleasing, the quality of the education delivered tells a different story.
Amongst the teachers surveyed, 66% thought the financial education delivered was either somewhat or very ineffective. In fact, three out of five teachers said the curriculum change had no impact and worryingly, a third of teachers didn’t know financial education was on the curriculum.
A combination of factors is attributed to this poor outlook on the UK’s financial education, from its position within the wider curriculum to a lack of training for teachers.
The lack of financial education and responsibility is having a significant long-term impact on children. Research from The Money Advice Service has found that children aged 12 to 17 whose parents made their spending decisions for them were more likely to spend unnecessarily and have poorer money management skills.
Evidently, young people benefit hugely from strong financial education and hands-on experience of managing their money — and part of this responsibility lies with parents, not just teachers. 80% of parents believe it is their responsibility to teach their children about finances — yet one in six don’t feel confident doing so.
To help, ISAprovider and investment specialist, True Potential Investor, has provided the following tips for teaching your children about finances and how they can be more responsible with their money.
Children benefit from learning about finances early-on
Children’s attitudes to money will be determined by the time they reach the age of seven, studies from The Money Advice Service revealed. It’s important that you start talking to them about money and what it means early.
- Encourage your child to join in with helping you count your cash to pay for something. Doing so can help them not only get used to handling and counting money, but also improve their numeracy skills.
- Ask your child to hand over the money to the cashier to educate them about the exchange transaction.
- Allow them to learn through play. Many children will like to play shop, which will again help them better understand money and value while still remaining fun.
Help your child distinguish between essential and non-essential spending
What your child wants and what they actually need is something you can help your child differentiate — and often, children don’t understand the cost of what they are asking for.
- The next time your child asks you for a new toy or item of clothing, consider that saying no isn’t necessarily a bad thing. Encouraging your child to save up for something they want rather than you buying it for them will help your child understand the value of money and delayed gratification.
- If you have an older child, work on explaining the cost of what they’re asking for in real-life terms. For example, is a £300 games console enough to cover the family’s monthly food shop? This perspective can help children realise the difference between what they want and what they need, and realise that they can’t always have everything.
Support your child with establishing financial goals
As highlighted earlier on, you can not only play an influential role in shaping your child’s attitude to spending but also saving. If they start saving towards a games console or other item, encourage them to budget with the money they have. This is applicable whatever the age of your child, whether they’re dealing with pocket money or wages from their first job.
- Make a suggestion to your child about splitting their money across spending, saving and donating. Giving them three jars or piggy banks is probably one of the easiest ways of doing so, so they can see a clear divide in their money. For older children, this can be done through having a separate current account to their savings account, while you may want to give younger children their pocket money in lower denominations so it can be easily split.
Prepare your teen to help them manage their finances
Transitioning from attending school to becoming more financially responsibly as they move onto college and university – is a very big leap. As a parent, you’ll need to prepare them the best way you can:
- Making their own mistakes is important learning for them. As they get their first job and start earning money for themselves, they may be tempted to splurge with their first wage, leaving them short for the rest of the week or month. You can disagree with their purchases, but try not to be too controlling over how they spend their cash. Eventually, when they’re tired of being skint for the majority of the month, they’ll realise the importance of budgeting and will consider a purchase more before buying it.
- Be enthusiastic about your child working and earning their own money. This is one of the best ways to understand the value of money.
- If your child is leaving home for university, ensure that you equip them with the knowledge they need to remain financially responsible. When the student budget is limited, it’s very easy to turn to credit cards with a high APR. Make sure they understand the options available to them as a student and encourage them to choose the best ones.
By teaching your children the importance of financial responsibility from a young age, you can better prepare them for managing their money in later life.
Being a good role model and leading by example is of course, one of the best ways of doing so. True Potential Investor’s parent company, True Potential LLP, has partnered with the Open University to establish the True Potential Centre for the Public Understanding of Finance, establishing three free personal finance courses to help improve financial confidence across the UK. More information can be found by visiting their website.